Equity Residential Properties Trust (EQR) — Q1 2026 Transcript

Good morning, and thanks for joining us to discuss Equity Residential's First Quarter 2026 Results. Our featured speakers today are Mark Parrell, our President and CEO; and Michael Manelis, our Chief Operating Officer; Bret McLeod, our CFO; and Bob Garechana, our Chief Investment Officer, are here with us as well for the Q&A. Our earnings release is posted in the Investors section of equityapartments.com. Please be advised that certain matters discussed during this conference call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to certain economic risks and uncertainties. The company assumes no obligation to update or supplement these statements that become untrue because of subsequent events. Now I will turn the call over to Mark Parrell.

Thank you, Marty. Good morning, and thank you all for joining us today to discuss our first quarter 2026 results. I will start us off, then Michael Manelis, our Chief Operating Officer, will speak to our first quarter operating performance, and then we'll go ahead and take your questions. Our first quarter operating results met our expectations with strength in San Francisco and New York, driving our same-store revenue performance. These two markets share common elements of strong demand from our target higher-earning renter demographic for our well-located apartment homes and low levels of new supply. So let me spend a few minutes now talking about why we are excited for the setup for our business in the back half of 2026 and into 2027. As I said on our last call, we expect deliveries in our markets to be down 35% in 2026 versus 2025. And the forecast for expected future deliveries continues to show substantial declines over the next few years, creating a very positive trend line for our business. Also, our higher-earning customer demographic continues to demonstrate solid financial health with rising incomes, and we also see lower delinquency across our portfolio. Then there is a single-family for-sale market that continues to be a challenge in terms of both cost and inventory, translating into customers renting for longer and leading to our record low turnover levels and strong renewal rates. With all those positives, the one missing ingredient is an accelerating job market and current signals there remain mixed. That said, we do see some green shoots in the form of postings on the Indeed job site for tech roles and other similar high-earning jobs, rising substantially across many of our markets since November of 2025. That provides us cautious optimism even in the face of recent job cut announcements at big tech firms. But with a portfolio that is more than 96% occupied with much lower levels of new apartment supply for the foreseeable future and limited owned housing choices, it will not take a lot of new jobs to drive more widespread, strong operating performance in the future. On the transactions front, we did not acquire or sell any assets in the first quarter. We did update our transaction guidance for the rest of the year to reflect the likely sale of a couple of properties. This is a continuation of our process of improving the portfolio by selling older capital-intensive assets or assets in places where we have heavy concentrations. As we previously disclosed, we repurchased $220 million of our common shares during the first quarter, bringing total repurchase activity to $500 million since August of 2025. And with that, I'll turn the call over to Michael Manelis.

Thanks, Mark, and thanks, everybody, for joining us today. I'm going to provide a quick update on our operating performance, including some high-level market commentary, and then we'll begin the Q&A session. So overall, we had a good first quarter with our results, reflecting the continuation of our disciplined operation execution with both same-store reported revenue and expenses generally in line with our expectations. On the expense side of the house, pressure from Northeast snow removal costs and utilities were offset by a very low 20 basis point growth in payroll. On the revenue side, we are starting the spring leasing season in a good position with solid demand and strong physical occupancy of 96.3%. During the quarter, we also saw improvements in bad debt and the financial health of our resident base remains very supportive. Household incomes for new move-ins have increased and rent income ratios have fallen to 19%. Sitting here today, net effective prices have increased just over 4% since January 1, which is in line with normal trends and our occupancy and current demand levels are providing continued momentum into the second quarter. On a cash basis, concession use continues to decrease across most of our markets and is down about 21% across the portfolio as compared to the first quarter of last year. As we have said in the past, an improving supply and demand balance leads first to increasing occupancy levels, next to reduced concessions, then to absolute rental rate increases, all of which ultimately drives growing blended rates from leasing activity and future same-store revenue growth. We already see San Francisco and New York, where we are posting strong same-store revenue results, as far along in this market performance continuum and expect most of our other markets to make progress to varying degrees as the year progresses. In the first quarter, we reported blended rate growth of 1.5%, which mirrored the blended rate growth from the first quarter of last year on this same-store set and demonstrates a 130 basis point sequential improvement from the fourth quarter of 2025. This sequential improvement included a 260 basis point lift in new lease change and a 30 basis point improvement in the achieved renewal rate increases. Retention continues to be a key driver of our performance. Our centralized renewal strategy is performing well as evidenced by 61% of our residents renewing with a 4.7% achieved renewal rate increase, which was slightly better than what we expected. Looking across our footprint, performance continues to vary by market, which was expected. The strength in key gateway markets like San Francisco and New York, which both exceeded our already high expectations for the quarter, are offsetting a slower-than-expected start in Boston and Seattle. Together, New York and San Francisco constitute about 30% of our NOI and have the best supply and demand outlooks in the country. Our urban exposure in these two markets is particularly unique to Equity Residential and should be a relative strength for us versus our peers this year. San Francisco continues to be the best-performing market in our portfolio. The tremendous growth in AI is making San Francisco, particularly the downtown, the place to be. Despite a few headline-grabbing layoff announcements, the market continues to have good job postings and strong office leasing activity. Looking at migration patterns, we are seeing more residents come to us from out-of-state and outside the MSA, which is a good sign for continued pricing power. Concession use in the downtown submarket where we derive 22% of our NOI is virtually nonexistent. The overall catalyst here is that strong demand is meeting a market that will deliver almost no new competitive supply in 2026. New York also continues to post excellent performance with demand outpacing supply and has almost no new competitive deliveries coming online in 2026. The large financial institutions continue to produce record profits and employment in the market is very stable. This sets us up for another year of strong results. Boston started the year with challenging weather conditions and is also still feeling the impact in Cambridge around life sciences funding. Our overall outlook for Boston has moderated as a result, but this is a very seasonal market, and it's still early. Overall, we still think that the city will outperform the suburbs based on the location of the 2026 new deliveries. And while D.C. is performing in line with our modest expectations, pricing power is less than normal, although we expect that to improve as the year progresses, given the dramatic decline in new deliveries. With only 4,000 units being delivered this year, a decline of over 65%, the real question here is whether we will see any improvement in consumer confidence in this market. The current levels of uncertainty are clearly holding back the potential for this market. Any positive shift should allow us to recover from what has been a slower start to the year. Heading back to the West Coast, Seattle is not experiencing the AI-driven demand boom that we're seeing in San Francisco and is currently trending below our expectations due to a slower start to the year. Historically, Seattle has followed cyclical trends from San Francisco, both good and bad, by about a year. And while it's still too early to call given some of the headline risks regarding layoffs, we still see the potential for this market to tighten up. Today, the market is still working to absorb the new deliveries from 2025. Concession use is down 22% in the quarter, but demand is still price sensitive causing this market to lag normal seasonal improvements. On a positive note, we've seen some good traction in the Bellevue-Redmond submarket with recent office leasing activity announcements and having more residents during the quarter come to us from outside the MSA. Right now, rents are trending positive year-over-year and concession use is very limited in the Bellevue-Redmond submarket. In Southern California, Los Angeles is performing in line with our tempered expectations. While the downtown is starting to feel a little better as the city prepares for events like the World Cup and Olympics, continued uncertainty in the entertainment business is an overhang on the market and we have still not yet seen any catalyst on the job front that will drive growth in the near term. In our newer markets, we continue to see improving conditions in both Atlanta and Dallas with concession use coming down, which again is an early indicator that the overall market is improving. Atlanta is performing the best, and if the current trends continue, this market should deliver slightly positive same-store revenue growth for the year which is better than what we thought 90 days ago. Turning to Denver, we are seeing some strength in occupancy and initial signs that the market may have bottomed out. With a sizable decline in new starts, improving operating conditions and current competitive pressure easing, our newer markets, excluding Austin, Texas, all have the right setup for recovery through the balance of this year. On the innovation front, we're about six months into our full deployment of the AI-assisted application process, which includes screening. As I mentioned, delinquency from new residents is trending down, resulting in improvements in our bad debt net performance. We're also continuing with the successful rollout of our bulk Internet program, and we'll have about 60% of the portfolio live by year-end. We believe that offering superior connectivity at pricing that is better than our residents can get on their own is supportive of our goal of delivering a value-add customer experience. As we look ahead, our priorities remain unchanged. We are focused on driving disciplined pricing, reinforcing retention and maintaining tight control over expenses. As we head into our primary leasing season, the environment at a high level is stable and in many areas improving. Portfolio-wide occupancy remains at strong levels so our focus naturally shifts from a reliance on occupancy gains to optimizing pricing. In the second quarter, we expect to see a sequential build in new lease change and strong, stable performance in terms of retention and achieved renewal rate increases. Overall, we are well positioned and we'll maintain our operational agility and strategic focus to deliver sustained value with the best operating platform and people in the industry that combine automation, centralization and a passion to deliver a seamless customer experience to our residents. At this time, I will turn the call over to the operator to begin the Q&A session.

I think last year in May, we started to see a few signs of an earlier peak in pricing. As you look forward 30 to 60 days, are you seeing anything that would suggest something similar to last year? Or does the seasonality at this point look more normal to you?

Eric, this is Michael. I think relative to last year, I look at this and say, our setup was pretty good at this time last year as well, and we feel good about the positioning that we have. The strength that we see on the retention side of the business right now gives us a lot of confidence that heading through the spring into the peak that we're going to maintain this position that we have. So I think what we have is a setup that is a little bit similar to last year, without the weakening that we really started to feel more in the late second quarter or third quarter. We are heading into a place of unprecedented times with such low levels of new supply. But I think if we can maintain this velocity and get over the peak leasing season, that back half of the year with the setup of such limited new competitive supply coming online really does position this portfolio well.

Makes sense. And then you mentioned that rent incomes were at 19% now. Can you just remind me what the sort of lowest that has ever gone. And I don't know if you have an opinion about sort of why rent growth has become a bit more disconnected from wage growth than is typical.

Yes. I mean I think the range historically has always been somewhere between 17% to 23% across our markets. And I think at any given time, you've seen this portfolio be 19% to 20%. So it feels like we're kind of right in line with the norms. I think what we saw in this quarter is you just saw a place where incomes have grown and you can see kind of the demand coming in that just have some higher income levels against rents that are in line with kind of normal seasonality, but I think that increase in the income is what kind of caused us to tick down a little bit.

Michael, I don't know if I missed it, but did you talk about where renewals were going out for May and June? And I guess, what are you achieving on those versus sending out? And just remind us what your blended spread expectations are for the year?

Yes. So Steve, this is Michael. So right now, I would say the renewal quotes that are out there really for the next kind of three months already at this point. And we're sitting somewhere just over 6% with the quotes and kind of have a lot of confidence in our centralized renewal process. Our centralized renewal team handles all the negotiations. It allows us to execute various strategies across markets and submarkets. This is the time of the year where we tighten up negotiations. So we've got a pretty high degree of confidence that we're going to maintain and achieve renewal rate increases somewhere right around that 5% range in the months to come. So in terms of the blended rates right now, we're not changing our full year expectations. We had about a 1.5% to 3% kind of growth rate. And embedded in that was implied new lease change roughly flat renewals somewhere around that 4.5% to 4.75% range. And right now, renewals are doing a little bit better than what we thought. New leases a little bit later than what we thought. So we love the setup heading into the peak leasing season. We love the supply picture in the back half of the year. But at this point, it's still probably too early in the year for us to change that full year outlook for the blends.

Okay. And then maybe just on capital allocation for either Bret or Mark. There's obviously been a pretty big dislocation in the public markets versus private market. Have you guys thought about leaning even heavier into the disposition program and kind of taking advantage of kind of what the private market is offering? Either to build up the balance sheet or kind of take advantage of buybacks?

Yes. Thanks, Steve. It's Mark. I'm going to start, and then Bob will kind of give you a feel for the disposition market. So we are open. We've done a fair amount of net disposition activity. You saw last year, $500 million. We took third, fourth and into the first quarter of this year to deploy those proceeds into the buyback. We're open to doing more buybacks. We like the match of selling these lower-growth assets and buying the stock. So we're very open to that. It kind of comes and goes a little bit. So I'll let Bob talk about some of the assets that are embedded in the increased disposition guidance you saw and some of the other stuff we might expose to the market. And we are open to using the balance sheet, meaning using debt to buy stock back. But you just have to remember that's a very different decision because you're affecting the capital structure of the company. And you can only do that a certain number of times before, obviously, you've used that capacity up. So our preferred means is dispositions. But of course, we are aware that at 4.3x we're relatively underlevered and have that opportunity as well. So Bob, do you want to...

Yes. Steve, it's Bob. And as Mark mentioned, we did introduce disposition guidance for the quarter, for the first time, so a $165 million. And these are assets that we're pretty confident that we're going to execute on, and that's why we introduced them into the mix. I think the critical thing that Mark already mentioned about what we're looking to sell are assets that are perhaps not best suited for our portfolio today, right? So these are assets that have value-add components or growth components or concentration risk. So those do take a little longer, typically to execute from a disposition standpoint because the buyer pool may not be as broad as just down the main fairway. That being said, interest, I think, in the private sector is very robust. And so we continue to see bidding tents that are very large. We continue to see interest in our asset class, and we continue to see a lot of private capital. So I think you'll continue to see us execute as we go.

Congrats on a great start to the year. And Michael, thank you for all the geographic detail. Can you comment on the magnitude of the decline in concession usage by markets? Just trying to figure out where we could start to see the new leases inflect sooner versus later?

Yes. I mean, really, the concession dollar amounts across most of the markets are down because this is a low volume of transactions in the first quarter as well. As we think about the concession use going forward, my guess is right now, we're going to see continued elevated cash concessions in the newer markets along with probably into the D.C. and maybe even Seattle markets for the second quarter. So for us, when we modeled the concessions out we still kept the concessions pretty heavy through the expansion markets for most of the year. As we turn the corner into the second half of the year, given the decline in supply, we expect concessions to materially decline, especially relative to the increases that we saw in the second half of last year. So I think the expectations right now on a full year for concessions, I would still model somewhere about 20% reduction relative to what we used in 2025. In the second quarter, my guess is that the year-over-year reduction is probably going to be a little bit less than that because the cash concessions are probably going to stay about the same as what we just did in the first quarter. But then as we turn the corner into the second half of the year, we do expect them to be down considerably compared to last year. So concentrated again, newer markets, a little bit in D.C. and Seattle. But outside of that, the majority of the markets are going to continue to see reductions.

Looking at your prior years, it looks like the April new leases tend to be fairly representative of what you end up in the second quarter. So I'm wondering if you feel that dynamic is going to occur again this year at minus 1.1%. Or do you think there's a chance of inflect positively?

John, it's Michael. No, look, I think you're going to continue to see a sequential build. Our net effective pricing is continuing to grow across this portfolio. So my guess is we should expect to see some continuation momentum of improving new lease change. I don't think it's going to be materially different than what you can see we just posted, but I don't expect us to end the quarter at minus negative 1% for the quarter. My guess is you'll see each month sequentially build and put us closer to kind of flat.

Okay. And then New York, it's been several quarters where you've been saying it's been one of your stronger performing markets. Recently, there have been some high-end multifamily assets that traded hands to another public REIT. So I'm just wondering, are those assets that you looked at? Is this a market where you would allocate more capital? Or are you still really focused on some of the expansion markets?

Yes. Thanks for that question, John. I'm going to just start about New York in general. And I'm going to let Bob talk about the deal that traded and our interest or relative lack of interest. So we're about 14% allocated to New York Metro, mostly Brooklyn, Manhattan and a little bit of the Jersey Coast and one asset in suburban New York. Pretty unique portfolio. It's performing really well. We're benefiting from all the banks doing so well. We're benefiting from financing of the AI boom, all those things and some pretty limited supply in that market. I feel like we're more kind of in a trading mindset in New York, 14% feels about right to us. So you may see us sell, you may see us buy. But by and large, 14% feels like a really good weighting. And our urban portfolio feels like a uniquely positive thing for us compared to our peer group. Bob, if you want to comment on what's sold?

Yes. We underwrite everything, whether or not we look at something and bid on something is different, and we did not bid or look at these specifically, but we certainly underwrote them. One of the benefits of our Manhattan portfolio that's also kind of a nuanced approach: it's pretty straightforward and pretty simple in that we don't have a lot of 421-a burn off. We don't have an extensive amount of retail exposure. And so they're pretty straightforward. And that's one of the benefits that you see flowing through to the underlying NOI. The assets that ended up trading were a little more complicated than our liking. They had more retail components. They had more tax abatement burn-off components. And just frankly, weren't of interest. So we didn't bid or look at them.

Great to see the continued strength in San Francisco and New York. It seems like the slowdown, as you mentioned, was in line with expectation; Boston, Seattle a bit weaker. But I guess I'm curious, kind of beyond the next few months, New York and San Francisco clearly had momentum. What are you expecting for your coastal markets, the other group I mentioned — L.A., Seattle, D.C., Boston — how do you expect them to trend over the next year? Which of those markets are you most excited about? It seems as though there's tougher comps in some cases, weaker demand drivers. So curious what data you're looking at, which of those markets perhaps you're more encouraged about over the next 12 to 18 months?

Yes, it's Michael. Looking sitting here today, you have to focus on D.C. with such a tremendous drop-off in supply. I mean, it's 65% less new units coming online. That will equate to some level of pricing power in that market. So we didn't have — we have pretty modest expectations for the full year. But I think as you fast forward and go out 12 to 18 months, that market with such little new competitive supply, and a few starts in the market as well, sets up for another strong year next year. We need a little bit of confidence on the demand side of the equation for us to really see that take hold. Outside of that, I've said for L.A., we had muted expectations. I don't know that we've seen anything yet to suggest that we'll model differently for the balance of this year. We'll kind of see where the entertainment industry is closer to the end of the year before we talk about next year on those. The Boston and the Seattle markets right now, I think they're off to a slow start. Boston had a really horrific winter, a lot of snow that probably impacted a little bit at the start that we're seeing. I like the setup in both of these markets, and I like the recovery potential of Seattle. The history has shown it follows San Francisco, good or bad, by about a year. So my guess is we'll start talking positively about Seattle sometime here this year or into the early part of next year.

That's great color. Appreciate that. On the perhaps Seattle or the expansion markets, I think you said they have the right setup for recovery into next year. We know the supply is falling. But maybe some color on where you're seeing some improving demand, pricing power or concessions are probably coming off the most. So maybe some color on that comment and which markets perhaps are standing up beyond the Atlanta or the world?

Yes. So let me just add, I can't speak about the overall expansion markets broadly, I can only talk about the few markets that we own and operate in those. Really, Atlanta, Dallas and Austin — right now, we have three properties in Austin. We don't expect any material change in performance this year because there's still a lot of overhang of supply and there's still some new supply being delivered this year. Between Atlanta and Dallas, Atlanta really ticked up a lot for us this last quarter and is now kind of set up to potentially eke out some positive revenue growth this year, which is better than what we thought. So we have seen concessions pull back. We do see good occupancy. We do have that momentum right now heading into the peak that is outperforming what we're seeing in Dallas, but Dallas still sitting here today feels pretty good. It's doing a little bit better than what we thought, but Atlanta feels like it's got more momentum right now.

So the Bay Area continues to be very strong, and you talked about AI driving that. There's a lot of investor debate about whether this is going to be a multiyear trend or whether AI ultimately pushes employment the other way. Obviously, nobody knows, but I'm just curious to get your take on how sustainable you see the strength in the Bay Area as being?

Yes, it's Mark. That's obviously a bit of a speculative question, and I know you probably feel that too. To us, it feels like the AI boom — and be honest, the affordability boom in San Francisco — is likely to continue. I mean rents downtown, where we have a significant portfolio, have just recently moved above rent levels just before COVID. Our residents can certainly reflect back on getting a 30% increase in nominal wages since 2019 and have the rent about flat. So there's room to run there. We see all the office leasing activity, everything around AI. It isn't just the actual creators of AI, it's all the systems that sit on top of it. A lot of this employs small groups of people building on top of AI systems and various helpful applications. So I think there's room to run here. I think this technology will have ebbs and flows and valuations will change. But I think there's a lot to come here, and I think residents can afford it because I think their nominal wages have gone up quite considerably in the San Francisco area. So this deal is pretty persistent to us. And again, the ecosystem of great universities and all the venture capital money in the area and all that is also supportive of this continuing to be an innovation center for AI and technology, which seems to me to be the future even if there are fits and starts.

Okay. I appreciate that. I know it's a difficult question. In the prepared remarks, you talked about residents coming to the Bay Area from outside the market. I was wondering if there are any stats or additional color you can give on that dynamic.

So every quarter, we're looking at where our new move-ins are coming to us, what percent come from within the MSA. And then obviously, over the last several years, for us to really start seeing sustained pricing power momentum, we'd like to see in some of these markets a bigger draw from outside the MSA, a bigger draw from outside of the state. We saw that both in San Francisco and in Seattle specific to the Bellevue-Redmond submarket. They're not huge percentages — it's like 5% more move-ins — but it's the trend lines that we've seen in San Francisco now where we have multiple quarters of seeing that pattern, which is really giving us that confidence that we're in a position of pricing power for the next several quarters.

Mark, just following up on — as you guys think about dispositions. The markets are certainly interesting. New York rebounded strong after the pandemic, San Francisco has been a dream case on the other side. You've got the contrast between Seattle and the East side, L.A. versus Orange County and San Diego. So as you guys assess your portfolio and assets to sell, how are you making the decision which markets sort of may have deeper longer challenges, and therefore, it's worth really downsizing versus which are sort of like New York or San Francisco, which are at the moment in time and you just have to wait for the pendulum to come back? I'm just trying to think, as you're assessing asset sales and buybacks, how you're thinking about the market?

Great question. I'm going to take the market focus. And maybe I'll have Bob speak to asset challenges because some of these decisions, Alex, we like the market or submarket, but we just have an asset that maybe we don't believe in the capital story or the micro location. So generally, our exposure pre-COVID to California was 45%. Now it's around 40%, getting that number down over time, probably mostly with the reduction in Los Angeles is, I would say, more of a strategic goal of ours. Right now, that's not a terribly salable market, so we can weight that out a little bit. So that's a spot where we maybe have a little less conviction: Los Angeles. And that isn't just the regulation that's pervasive in California. It's just unemployment stuff. Bob talked about that on the last call and Michael has, too. It's the entertainment industry really feeling like there's been a paradigm shift away from Southern California and just not feeling like those employment drivers are what we thought they were when we made those investments initially. And a little bit of downtown Seattle — that is an area that has some advantages and has been kind of recovering in fits and starts, but we do have a fair bit of exposure there and probably is another strategic reduction. All that, it's a little bit more tactical. Bob, do you want to talk about that?

I mean it really is an overall portfolio strategy approach, really taking an integrated approach to that at the asset level. So we integrate our capital with our disposition and acquisition mindset. We underwrite every single asset. I just actually went through this exercise with the team because if you're not selling, you're buying. And so we integrate that into our capital plans. We look at the asset, we make an assessment of what we think the asset performance is going to be going forward. We compare that against our cost of capital, and we decide what can we do about that? What levers do we have? So in some instances, that can mean on a specific asset, we're going to invest that value-added renovation capital. We're doing $90 million of that this year, and we'll get a return that will compensate the shareholders. In other cases, we see that that's not an option. And so therefore, we look to sell that in the market when the market allows and redeploy that in something that's more accretive.

Okay. And then the second question is regarding the stock buybacks: you guys before have done developer equity programs where you fund a third-party deal, you get fees along the way, etc. How is that looking as an opportunity to put capital out, especially if you think about de-risking to wholly owned development? How is that looking today versus just straight buying back your stock?

I want to draw a distinction. It's been pretty uncommon for us to do any kind of investment in development where we don't have a clear path to ownership. All our deals, the two new ones we did, they do have partners in them, but we have the right and expect to own those assets. It's been pretty infrequent in my career here where we funded a program where it's just funding a development but we don't have an expectation or a legal right to own it somewhere in the process. So I'd say we don't do that sort of mezzanine lending or preferred equity in development very much. When we do it, whatever the structure is, whether it's called debt or equity, it's intended for us to own the property and there's a path to ownership.

But I mean as far as the path to ownership, how does that look versus buybacks as you judge the math of doing a third-party development deal where you're going to own it versus buying back your stock?

What you're highlighting is that the stock is obviously a really compelling choice. It's probably oftentimes the most compelling choice. The next decision is probably the development side today. Now you have to risk-adjust it, because the risk in development is different than the risk in the stabilized portfolio implied in the stock price. But the two deals that we did that we announced or started this quarter, those deals generally on a current yield basis are closer — may not be exactly perfect with the implied cap rate of the stock. But then we're also looking at the IRR in the aggregate over time and comparing that to our WACC. In the instance of the Atlanta deals, you're looking at delivering, in one case, an asset that is in a very supply-constrained area that does exist even in Atlanta. When you look at reasonable rent growth, we can generate a nice spread on an IRR basis without making crazy assumptions on rent growth or cap rate compression — we don't have any cap rate compression in our math — that is a premium to our WACC. So the development side is probably right now the best other alternative outside of stock because acquisitions are really tough relative to what private capital is underwriting. We're seeing private capital underwrite deals still in that 4.75% to 5.25% kind of spot rate and IRRs that are probably in the 7s.

I guess as we think about the ramp in blends we saw from 1.5% in the first quarter of '26 to 3% in April. Was that improvement relatively similar in the established and expansion markets? Or was it definitely stronger in established because of New York and San Francisco?

Julien, it's Michael. I think when I look at the quarter, I would tell you on a sequential basis almost all of the markets showed around a 200 basis point improvement relative to the fourth quarter. I haven't really done that analysis for the April numbers. But most of the markets have shown that kind of sequential improvement. Obviously, San Francisco and New York are more like 400 to 500 basis point sequential improvement on the new lease side. Renewals have been pretty consistent, where almost all of the markets were equal to slightly better outside of D.C. and Boston, which were marginally lower on a sequential basis. So I look at that growth to the April number and say it's kind of in line with what you would expect from a normal pricing trend seasonal curve. Given our positioning and where occupancy is, our pricing trend has continued momentum and we're going to continue to see that through the second quarter.

Julien, it's a difference between absolute numbers, which are certainly better in the established markets than they are in the newer markets for us. But Michael is signaling that the momentum or trend line in the established markets is the same — just the absolute numbers are still different.

Got it. That makes sense. And then maybe moving over to Seattle. Are there any forward indicators you're looking at in Seattle that would indicate that it could follow San Francisco? I mean, just so far, it seems like that market had a disproportionate amount of tech layoffs and corporate roles without as much of the AI boost from company creation and job creation. The real-time rent data just continues to deteriorate in Seattle.

Yes. I think one of the positives I'd point to is momentum in Bellevue-Redmond. If you look at headlines around office leasing activity, you see that kind of momentum taking hold. You look at the migration pattern I mentioned earlier where more folks are coming back into the market. Some of that could be from Microsoft return-to-office policy changes early in the first quarter. The setup feels right for that market to show momentum. Right now we still have a little bit of overhang from the supply delivered in 2025 that we're working through in the city. We also saw a reduction of inbound migration from foreign countries. Typically, Seattle has a higher concentration of move-ins from outside the U.S.; we run like 4% to 5% in normal times. Some of that quarter we ran like half of that. So longer term, I see the setup and recovery indicators taking hold. We probably need a couple more quarters for it to really follow the trend we saw in San Francisco.

Michael, I have a follow-up question on the new lease conversations. You mentioned the expectation for the full year is flat to maybe slightly negative now for the portfolio. Can you give us a sense for the goalposts? What kind of range new lease growth rates will be for the best swath of the portfolio and the weakest?

I don't have that range in front of me for the whole portfolio, John. What I'd say is newer markets are going to continue to still have negative new lease change. The absolute numbers are still negative. Then you get into markets like San Francisco where we're putting up near 10% change. I think that's going to be a pretty wide spread when we end the year between newer markets and San Francisco.

Okay. And then Bob, second question about dispositions that you have sold or you've potentially brought to market and then pulled off for the last 6 to 9 months. Really the topic is perhaps widening cap rates for more CapEx-intensive lower-quality assets. So I guess, over the last 6 to 9 months, have you had to change the types of assets you're actually selling? Has there been more re-trading when you bring properties to market and you're not getting a bid? Is there more churn in that disposition pipeline to still hit a reasonable cap rate on the dispose?

I wouldn't say there's more churn than we expected or anything different than what we saw last fall. Some of these assets are unique and have different opportunities, so those may not attract 20 bidders because they have capital components or value-add needs, retail, ground leases, or other things. That said, it feels the same to me as last fall. The smaller the deal, meaning $75 million to $150 million range, you get a lot more people showing up. If you have a deal that's individually 150 or more, the buyer pool is smaller. But sentiment hasn't meaningfully changed over the last 6 to 9 months in a way that surprises us. And I might add, John, too, from a capital standpoint, the secured debt markets are still very supportive of these types of actions in multifamily. There's lots of capital available. So certainly no change from that end.

I know you guys got rid of the blended and new lease pricing by market, which I was sorry to see you go. But I wanted to see if you could maybe just give some commentary on Southern California — how that's trending year-to-date on new and renewal leasing versus last year? Have you seen any improvement there?

Nick, relative to Southern California for the first quarter, we're still seeing negative new lease change and it's most pronounced in Los Angeles. Renewals have been consistent. The SoCal portfolio continues to be a story around Los Angeles. Sitting here today, we've got stable occupancy and a pricing trend curve that's flat year-over-year. We've got fewer concessions right now in downtown and Koreatown where we had supply pressure last year. Blends are starting to show positive momentum here, but it's less than what you normally would have expected. As we work through the balance of the year, expect moderate performance out of L.A.; we're not really seeing anything that's going to point to a robust recovery in pricing power in the near term.

Okay. And then second question is, Mark. If we look at the multifamily sector, there's kind of a clustering of valuation for the stocks that are in your peer group. What I'm wondering is are you and the Board having conversations to sort of go even more in terms of differentiation and strategy, whether it's investments, platform, sort of how you're managing the balance sheet that you guys are focused on to sort of differentiate yourself versus the peer group?

We're always engaged on strategy — it's a topic every meeting. Real estate expert investors understand the differences between the big apartment companies. We have a different strategy: more urban-focused, less development-focused, and more operationally focused on excellence and investment in our operations. Dedicated investors know the difference between us and our peers. Generalist investors and index funds probably don't. It's hard to break through that except by more dramatic steps, but the Board and management continuously evaluate our strategy and differentiation.

Great. I guess here's an opportunity to talk about your operations. We haven't really talked about the expense side of things. Can you talk about a couple of things here. Number one, the insurance renewal that I think was in March, how that played out? And how that looks versus your guidance? And then just energy costs. Is there anything that's changed your outlook on the expense side given where energy costs are going? Or is there anything you're doing to mitigate expenses? Maybe just talk through that? Or if there's any other expense line items that are meaningfully different than your initial outlook or that you want people to focus on how you're managing them?

Thanks for the question. I'd start with insurance: we did see our property insurance premiums come down, which we actually viewed as an opportunity to buy some additional coverage. That hedges us against annual casualty loss exposure. While property premiums came down, we have seen general liability premiums increase, as well as some general liability expenses that run through our same-store ops. Putting that together, the 4.5% quarter-over-quarter increase we had in the first quarter is not unexpected and was anticipated in our guidance. As for energy, utilities were up a little bit higher than we probably thought for the year. A lot of that relates to the number of storms we had early in the year in the Northeast in particular. There's noise in energy costs generally across the board; electricity and gas were impacted in the quarter. We tend to hedge as much as we can, but there's only a small amount we can hedge. To the extent we can, we are hedging energy prices. On the flip side of higher utility costs, on the revenue side we were able to have higher fees and other income, which was up and offset a bit of the higher increases in expenses.

One thing I would add on the capital side is that we have a number of sustainability-driven capital projects focused on reducing consumption because that's the lever you can manage best. We've accelerated some projects given the rise in prices and re-underwrote things that may not have previously hurdled. We're applying operational excellence across the platform to keep costs down as much as we can.

We also have an energy conservation checklist. Our on-site teams go through that checklist and look for opportunities to reduce overall consumption. We measure consumption and spotlight successes. Small things, like turning down temperatures in hallways or common areas by a degree or two, start to show up in bills. There's a lag effect but we have the right mindset in place to mitigate consumption risk.

Okay. That's very helpful color. And then we noticed your leasing and advertising is up pretty meaningfully year-over-year. I think it's over 20%, higher use of interactive marketing. Can you just talk about something — is there anything changing on the AI side? Are you using more resources to optimize your appearance in AI searches? Is there anything to read into that data? And if there is, what are the — how is it going?

On that line item in the quarter, we did have an outsized increase from a write-off of broker commission we took in the first quarter related to our non-residential portfolio. When a tenant vacates early, we write off the remaining amortized brokerage fees, which we did at three retail properties in the quarter. So that contributed to the higher number. Otherwise, it was in line with what we were thinking given technology investments rolling through.

Specific to AI, the industry is changing quickly and the way prospects find listings by leveraging LLM models is going to change the ILS environment. Our team is focused on figuring out ways to become relevant in that search optimization. We haven't seen anything take hold yet and it's not a driver of the expense that Bret mentioned, but it's something the team is focused on and we think over time it can reduce dependency and overall reduce leasing and advertising expense. There are absolutely ways to gain a strategic advantage here for folks who invest and focus on it.

This is Ami on with Michael. I was curious, how much of an impact does burning off of concessions have on your blended rent spreads? So are your blended rent spreads artificially boosted by concession burn off?

They were always reported on the same basis, so they're always net. We didn't change the basis of calculation. Getting rid of concessions is the beginning of that continuum of improvement: you get occupancy, you remove concessions, you move up base rents, and that leads to same-store revenue. But because the reporting basis hasn't changed, it's not an artificial boost from changing reporting conventions.

Okay. So not a material impact. And then I guess just to touch on the ballot measures that you're monitoring. We know Massachusetts is up. Are there any others that you're monitoring closely?

Massachusetts is the main area of focus. It's likely to go to voters and the industry has mobilized to make arguments about supply and the negative impact of rent control proposals on housing supply. There are a couple of deals we were looking at in Massachusetts to start building that we stopped. The two deals we are almost done building we might have thought about differently as well. It's a very negative proposal for long-term housing supply and affordability. There's also a measure in D.C. we're watching that would freeze rents for two years. A lot of our D.C. portfolio is already rent-controlled, so it's less directly meaningful for us, but it's still a headwind. Capital is sensitive to regulation; when you deny returns you get less investment and worse affordability. So Massachusetts is the main show this year.

Maybe a little bit more of a philosophical question. With turnover rates as low as they are and even with all of the supply we've had the last few years seeming to stay really low, wondering how you view that. I recognize from a same-store NOI perspective it's a benefit from reduced R&M cost. But from a renewals versus new lease growth perspective, wondering how you see the lack of mobility within the housing ecosystem currently: does it benefit renewal, but maybe hurt you on the new lease side? Or am I thinking about it incorrectly?

Adam, we've seen research about less geographic mobility in the U.S., and that's generally a negative for overall U.S. growth because growth benefits from people moving to jobs. But our target demographic — younger, higher-wage renters — still moves more often. For our demographic we haven't really seen less mobility; if anything, mobility for our residents can be neutral or a bit positive. So while less overall geographic mobility is a challenge for the country, it's not particularly negative for our target resident base.

That's great color. And then maybe just a little bit of a different question. Wondering about the Sunbelt recovery: a crystal ball question. When you look at supply forecasts for your expansion markets, how do you think about the pace of recovery there? Could new lease growth get positive later this year or is that more of a 2027 story? I recognize nuances by market — Austin probably being the softest. But what's the latest thought on timing?

We need to see concessions go down and occupancy firm. That's what we're seeing in Atlanta and that will lead to rent recovery. The expansion markets — Dallas, Denver, Atlanta, excluding Austin — have decent forward setups but need more job growth because they have more supply. They are higher beta markets. I think some are positioned for a slower recovery and others faster. Atlanta is in the pole position for us; Austin is lagging. Some of these markets could show inflection later this year, but a broader recovery across all expansion markets may be more a 12-month play.

The other income line item this quarter had some strong results. Just curious if that's really being driven more by expense reimbursement because you have higher occupancy, whether it's kind of other ancillary income sources that are more sustainable, or anything one-time in there? Just curious about that line item and what we can expect going forward.

We did see higher other income this quarter. Bad debt was better by about 10 basis points. We also saw positive trends in storage and some of the on-site ancillary charges we've been generating, as well as the continued rollout of the bulk WiFi program from last year. Those are contributors to the increase and are more sustainable than one-offs.

Thank you all for your time today and for your interest in Equity Residential.